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The ups and downs of family-owned restaurants

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The Philadelphia Inquirer ran a story Monday about the legal troubles unfolding around a famed restaurant, illustrating the troubles that can ensue when the next generation disagrees about how to handle a family business. The saga of the Victor Café, founded in 1920 as a phonograph store that eventually became an opera-themed restaurant boasting classically trained singing servers since the 1970s, could provide fodder for an opera all of its own.

The Inquirer story details the battle for control that began after owner Lola DiStefano, whose parents opened the place, began growing forgetful and wasn’t able to run the restaurant on her own anymore. The change brought up long-simmering sibling rivalries that ended in court.

The industry abounds with stories of family restaurant companies that have successfully navigated the tricky waters of succession. Texas-based Whataburger has thrived and grown under family ownership, from the first eatery Harmon Dobson opened in Corpus Christi in 1950 to the more than 700 units under the stewardship of his son Tom, who runs the company today.

Lawyers and experts quoted in the Victor Café story say there’s little that could have been done to prevent the owner’s grown children from taking their long-held grudges to court, but better planning early on might have helped head off the worst of it.

The U.S. Small Business Administration offers tips for managing a successful family business, advice designed to head off the kind of workplace problems that can crop up when family members work for you and issues that come when it’s time for the company to change hands.

The SBA advises family business owners to:

  • Remember that at work, the business comes first. It’s important to keep decisions objective and not personal as you’re building the company, with clearly defined roles for each family member who works there.
  • Consider hiring a manager from outside the family, to ensure objectivity when it comes to making the tough decisions.
  • Avoid taking sides when disagreements crop up among family members who work for you.
  • Plan for succession far in advance of the day you’ll be ready to pass the business along, either to the next generation or to new owners from outside the family. Consider: Your family goals for the future, which family members are best-qualified and most-interested in taking over the company, and what you’ll do if there’s not a family member to run the company after you retire.

Are you running a family-owned restaurant? Share the challenges you’ve faced in the comments.